New England economy seen improving, but unevenly

As New England recovers from the worst recession in decades, Massachusetts and Vermont are posting the strongest gains while Rhode Island and Maine lag, an economists' group said Wednesday.

STEPHEN SINGER

As New England recovers from the worst recession in decades, Massachusetts and Vermont are posting the strongest gains while Rhode Island and Maine lag, an economists' group said Wednesday.

External factors such as Europe's recession, which is damaging markets for exports from New England businesses, and federal spending cuts, which are reducing sales by the region's defense contractors, are crimping the region's economy, according to the New England Economic Partnership.

Through 2016, employment in New England is forecast to grow an average of 1.4 percent a year and economic growth will average 3.3 percent a year.

With slow growth, the region is not expected to return to its pre-recession employment level until 2015. The unemployment rate will remain lower than the U.S. average, but is not expected to be below 6 percent until 2015.

Ross Gittell, vice president at the New England Economic Partnership and forecast manager, said Boston is benefiting from technology businesses and Massachusetts is the only state in New England to restore all jobs lost in the recession. Vermont will soon be the second, he said.

Unemployment in Massachusetts was 6.4 percent in April, 8 percent in Connecticut and 9 percent in Rhode Island. The U.S. unemployment rate was 7.5 percent in April.

Rhode Island is the only state in New England that's not expected to recover lost jobs before 2016, the report said.

"Rhode Island did not have the same transformation in manufacturing as Massachusetts and New Hampshire in last three decades," Gittell said.

Edward M. Mazze, a business administration professor at the University of Rhode Island, said it's a costly state to do business in and it fails to do enough to attract business.

"We have no economic development strategy other than praying that Massachusetts and Connecticut get better and the rest of the economy gets better," he said.

Connecticut lost 121,000 jobs since a peak in March 2008 regained just 42 percent of the lost jobs.

New Hampshire, where unemployment was 5.5 percent in April, benefits partly from being in the Boston metro area.

"It never went down as much as other states in the recession," Gittell said. "It's less of a climb back up."

Maine's job growth has been significantly behind the U.S., the report said. The country has recovered nearly two-thirds of jobs lost in the recession, but Maine has recovered just 10 percent. Economists blamed slower growth in Maine in education and health services, professional and business services, construction and manufacturing. Maine, which is a destination state for tourists, matched U.S. employment growth only in leisure and hospitality.

Alan Clayton-Matthews, a professor at the School of Public Policy and Urban Affairs at Northeastern University, said the housing bust in Massachusetts was not as extreme as in other states, helping its economy fare better than in the United States.

"The housing market is finally coming back," he said. "Prices are coming back steadily."

Collapsing mortgage markets and real estate are blamed for triggering the recession, which began in December 2007 and ended in June 2009. A weak recovery has followed, with employment rising only gradually.

The return of the jobs market has helped boost household income and a rebounding stock market has strengthened household wealth, Clayton-Matthews said. That's contributed to stronger consumer demand.

However, demand would be stronger without automatic federal spending cuts that took effect in March and the end to a temporary payroll tax cut, he said.

The recovery in Vermont's economy in the next five years is expected to be fueled by businesses in the state taking advantage of a stronger global economy, a return to "more normally functioning financial markets" and improving residential and second-home markets.